When you want to set up a new business in Portugal, you must firstly choose what type of company you want to open.
In Portugal there are many types of legal entities that can be opened by local and foreign investors.
Sole proprietorship, with the main characteristic of a business developed by a single individual who can perform an activity in sectors such as commercial, industrial or agricultural services. The legal forms for establishing a business for a single investor are: sole proprietorship, single shareholder in a limited liability company or an individual limited liability establishment.
In a sole properietorship there is no separation between the personal assets and those assigned to the company, as the individual entrepreneur responds for the debts contracted in the exercise of the business activity towards its creditors, on all goods that comprise the assets.
The sole proprietorship type of business doesn't require to have a minimum capital to start business and the companies legally defined as individual entrepreneur don't need a social contract. The sole trader must adopt a firm name (trade name of merchant) made up of his civil name, full or abbreviated, but he may add a nickname by which he is most known in the business world and even the reference to the business and can never take more than one signature.
Another form of business is the partnership, which consists in several partners that contribute to the business’ responsibilities as provided in the agreement signed at the constitution moment.
There are several forms of partnerships, for example:
- private limited liability company (LDA),
- limited partnership company (sociedade em comandita),
- partnership company (sociedade em nome coletivo),
- public limited company (S.A.),
The private limited liability companies are the most used legal entities in Portugal and they are characterized by the partners’ limited liability. As a rule, this type of company consists of minimum two partners, but in the beginning the law permits one partner for a period that does not exceed one year. However, it is possible the establishment of a single partner, whether natural or legal person, who is the holder of the entire issued share capital. These companies are called sole proprietorships and must include this designation in their name.
The amount of share capital is freely determined in the articles of incorporation, corresponding to the sum of shares subscribed by the shareholders.
The share capital is represented by "shares", which may or may not have the same value, but cannot be less than 1 Euro each.
The transfer of shares will be performed by written agreement duly registered at the responsible Commercial Registry. The statutes may set limits or conditions for the transfer of shares or preemptive rights in favor of other shareholders or to the company itself.
The general board must approve the annual accounts within three months from the close of the fiscal year to which it relates. The publication of the accounts is not compulsory, but the annual accounts must be filed online through IES.
A private limited liability companies must distribute at least 50% of the annual distributable profits, unless otherwise is stipulated in the statutes or approved by a majority of 75% of the shareholders.
The law provides setting up a legal reserve equal to 5% of profits until the reserve reaches an amount equal to 20% of the share capital. In any case the minimum amount applicable to private limited liability companies may not be less than EUR 2,500. The articles of association may establish a higher minimum amount for the legal reserve.
The public limited company is a form of partnership which must have at least five shareholders (natural or legal persons).
The minimum capital required for SA is currently € 50,000, represented by shares that may or may not have nominal value, however, the same society cannot have both types of shares. All shares should represent the same fraction in the capital amount and, in the case of having nominal value, must have the same nominal value. The payment of a maximum 70% of share capital in cash may be deposited in a period that cannot exceed five years. The rest of the capital share must be deposited at the incorporation date in a bank account created on behalf of the society.
The publication of the accounts is not compulsory but the annual accounts must be filed online through IES.
Unless otherwise is stipulated in the company’s statutes or approved by a majority of 75% of the shareholders, the SA must distribute at least 50% of the annual distributable profits.
One of the most important legal requirements stipulates setting up a legal reserve equal to 5% of profits until the reserve reaches an amount equal to 20% of the share capital. The articles of association may establish a higher minimum amount to be deposited as legal reserve.
In the partnership company, the partners have unlimited responsibilities in relation to society’s assets and before the company's creditors. The company must be composed of minimum two partners who sign a social pact for the allocation process of profits and losses.
The limited partnership company must be composed of minimum two shareholders fully responsible for the company’s debts and legal compliance and other shareholders with limited responsibilities.
Each of the limited partners is liable only for its entry, while the general partners are liable for the debts of the company
It is a mixed liability company because it gathers limited partners, who contribute to the share capital and partners with unlimited liability that contribute in goods or services, assuming the management of the company.
The consortium consists of the contracts by which two or more persons are obliged to undertake a certain activity or make a certain contribution for the purpose of pursuing any of the objectives set by law.
Where the Consortium is considered as external, for example when the activities are directly provided to third parties by the Consortium, one of the members shall be appointed as head of the consortium and must assume the duties of this position, including representation authority.
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